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Straining To See Fed Transparency, Again

  • Written by Syndicated Publisher No Comments Comments
    November 2, 2013

    The Fed’s statement after its FOMC meeting this week has analysts re-thinking once again when the Fed may begin tapering back its QE stimulus.

    Initially, Fed Chairman Bernanke spooked markets in May when in his testimony before Congress he said that, depending on the economy, the Fed could begin tapering as soon as its June meeting. When markets tanked from their May high, he rushed in to assure markets that the economy was not ready for tapering yet, and the market rallied off its June low.

    In August hints in various Fed Governor’s speeches had expectations rising high that tapering would be announced at the September meeting, and the market tanked in August. But it rallied again when the Fed surprised with its ‘no taper’ announcement at the Sept. meeting.

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    The debt-ceiling crisis and threat of a government shutdown then spooked the market again to its October low. At that point it was thought that the continuing string of weak economic reports, plus the expected further negative impact of the shutdown, would have the Fed postponing tapering until at least next March.

    With the further weak economic reports this week, an increasing number of analysts were pushing the beginning of tapering out as far as next June, and that it would not be completed until sometime in 2015. And the stock market rallied again to a higher high.

    And now yesterday’s FOMC announcement seems to be rocking the boat again.

    Analysts are now concerned that yesterday’s statement did not include the worry about“tightening in financial conditions observed in recent months”, which had been in last month’s statement. And that since the phrase remained in the statement that the FOMC “decided to await more evidence that [economic] progress would be sustained before adjusting the pace of purchases”, means that tapering is still an option at the December meeting.

    The market seems to move only in reaction to its expectations of what the Fed may or may not do. So will this new concern, pulling back the expectation for the beginning of tapering from March or June of next year, to maybe as soon as the December or January meeting, be the catalyst that brings the short-term correction from the overbought condition above the 50-day m.a. I warned about in my weekend column?

    And if so, will a short-term correction be the beginning of something worse?

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    U.S. budget deficit continues to improve.

    The Treasury Department released the latest data on the U.S. budget deficit yesterday. It was down to a five-year low for fiscal year 2013 (ends Sept. 31), at $680.3 billion, as government spending declined and tax revenues reached $2.77 trillion, a record high.

    To read my weekend newspaper column click here: The Bull Market Continues, But Watch Out For The Short-Term

    Subscribers to Street Smart Report: There is an in-depth Markets Update, including gold, from late yesterday afternoon in your secure area of Street Smart Report.com 

    Images: Flickr (licence attribution)

    About The Author – Sy Harding, Street Smart Report

    Sy Harding publishes the financial website Street Smart Report Online and a free daily Internet blog at Sy’s Free Blog. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!

    It includes our research and analysis on the economy and markets, and provides charts and buy and sell signals on the major market indexes, sectors, bonds, gold, individual stocks and etf’s, including short-sales and ‘inverse’ etf’s.

    It provides two model portfolios as guides. One is based on ourSeasonal Timing Strategy, one on our Market-Timing Strategy.

    In depth updates are provided every Wednesday, with interim ‘hotline’ updates every time we make a trade. An 8-page traditional newsletter Street Smart Report is provided on the website every 3 weeks, in pdf format for viewing or printing out.

    There is the Street Smart School of online technical analysis ‘seminars’,commentaries to keep you ‘street smart’ about Wall Street, and much more. 

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